To make an organization run smoothly, directors often perform advisory and fundraising functions that aren’t specifically spelled out under bylaws and state statutes. These functions, although not always mandated, can be critical to the well-being and positive public perception of the nonprofit entity. Sometimes the functions are delegated to individual board members.
When carrying out these extra duties, directors must make sure that they’re acting within the scope of authority granted to them under state law and the bylaws. Scope of authority basically means that directors have the authority necessary to carry out their legal and designated duties, and to further the nonprofit organization’s mission. If a director acts beyond the scope of his or her authority, the director may forgo some of the legal protections that nonprofit directors normally have.For example, assume that a director of a nonprofit community recreational facility wants to open a hot dog stand in front of the facility. Assume that the directors go by the book procedurally in voting on this action and approve the food stand. Now, imagine that there’s an outbreak of salmonella from food sold at the stand, and a lawsuit is brought against the directors of the organization. This stand may be well beyond the mission and hence the scope of authority of the community facility. On the other hand, if this is deemed a fundraising activity that’s within the scope of the nonprofit mission, the board of directors would enjoy immunity in many states for their actions.
